display | more...

Founded in 1998, CyberRebate, Inc was perhaps one of the more notorious examples of the late 1990s/early 2000s Dot-Com Bubble. Compared to other companies that went public around the time - some without revenue, without customers, or even without much of a product, CyberRebate may actually seem like kind of a solid thing at first glance: It was an online store, and it was popular. At its height in the early 2000s, the website attracted over 7 million people a month, and CyberRebate was listed as the 3rd largest online retailer worldwide - only behind eBay and Amazon, two giants that would survive the bust.

However - and that's one hell of a whatever - perhaps only a stock market bubble as massive as the Dot-Com craze could have possibly lead to something like CyberRebate becoming as big as it was. The company's promise to customers sounded, quite simply, like an outrageous scam: Order electronics and related products from our online store at exuberant prices, get the stuff delivered within 3 days, free of shipping cost. Then, apply for a rebate, and we will refund you 100% of the cost - within 2-3 months!

As you may imagine, this sounded too good to be true for many people, but who wants to miss out on such an opportunity? A lot of customers ended up making just a relatively small order at first - below $100. When the rebate finally arrived many weeks later, customers became euphoric and started ordering like there was no tomorrow. Some came up with a simple scheme: Get stuff "for free" from CyberRebate, then immediately sell it on eBay. That was the "new economy" everyone was talking about, right?

Of course, things went dreary pretty fast. Some maxed out their credit cards to order as much merchandise as possible. Thing is, that time you had to wait for your rebate at the minimum? Just so happened to be longer than credit card cancellation deadlines (60 days). And those prices of the products you ordered? They were massive. One customer described ordering a CD, a DVD and a watch for a total of $500. And as you might imagine, prices only grew as the site became more popular.

You can find the information everywhere that products on CyberRebate at the end were as expensive as ten times of the typical retail prices. But it appears as if even that was not the limit. According to a radio broadcast from the time around which (spoiler alert!) CyberRebate inevitably filed for bankruptcy, a particularly outlandishly priced product was a 15" monitor which cost a cool $6000. Now think of those bulky, dim, lo res monitors from the time, and remember that you need to adjust that price for inflation!

But how was the whole thing ever supposed to work? The people at CyberRebate argued that they had the expectation of a significant number of customers simply not claiming their rebates. Because prices were so incredibly high, those few "suckers" ending up paying would make all the difference.

Different sources make vastly different statements on what percentage of suckers the company calculated with. One source says the CEO expected to make a profit if 5% of the customers never claimed their rebate, which is terrible math. Another source says that a percentage of 50% suckers was expected, which is terrible common sense. You would need a Nathan for You-style rebate for that percentage to seem realistic.

But let's not get into the questionable financial calculations themselves (which would, of course, be more complex than just saying "that doesn't work!"). The problem I would expect here is that, the more pricey an item is, the more likely it will be for the customer to claim the rebate, so the suckers would spend a lot less than others. And while people who successfully claim their rebate will order more and more, suckers would be unlikely to repeat their mistake, wouldn't they?

CyberRebate closed in the spring of 2001, without a warning. The company was over 80 million dollars in debt at the time, most of that from outstanding rebates, with many customers being owed five figures. In the end, CyberRebate ended up being little more than another variation on the tried, true and tested ol' Ponzi scheme.

Log in or register to write something here or to contact authors.